One month time left out to reconcile books of accounts of FY 2018-19 to ensure that maximum ITC is claimed.

[Ganeshan Kalyani]

As per the provision u/s 16(4) of CGST Act, 2017, a taxpayer can take input tax credit in respect of any invoice or debit note for supply of goods or services or both before the due date of furnishing of the return u/s 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or up to the filing of relevant annual return, whichever is earlier. The extract of the said section is reproduced below for easy reference.

"A registered person shall not be entitled to take input tax credit in respect of any invoice or debit note for supply of goods or services or both after the due date of furnishing of the return under section 39 for the month of September following the end of financial year to which such invoice or invoice relating to such debit note pertains or furnishing of the relevant annual return, whichever is earlier."

As per the aforesaid provision, the time limit for taking input tax credit for the financial year 2018-19 is up to the filing of return (GSTR-3B) for the month of September 2019. The due date of filing of GSTR-3B for the month of September 2019 is 20th of October 2019. Thus, a taxpayer has the entire month of September 2019 at his disposal to carry out reconciliation of his books v/s return. On reconciliation between the return filed and the books, if he finds any difference then appropriate action is required to be taken by the taxpayer in the September 2019 month's return. The reconciliation is necessary because at the time of filing of return in Form GSTR-3B it might have happened that ineligible credit is inadvertently claimed. Also, it is possible that eligible credit is missed out to be taken. Hence, it is very important to relook into the books of account to ensure that eligible input tax credit is taken. 

Rule 69 of CGST Rules, 2017, speaks about matching of claim of input tax credit. In the explanation given in the said rule it is mentioned that "the claim of input tax credit shall be considered as matched where the amount of input tax credit claimed is equal to or less than the output tax paid on such tax invoice or debit note by the corresponding supplier". Thus it becomes essential to carry out GSTR-2A reconciliation of FY 2018-19 with the input tax credit claimed in the GSTR-3B return. Since, the return in Form GSTR-2 never came in to effect the necessity of reconciling GSTR-2A was not required. Thus, the taxpayer claimed the credit based on his self assessment.

 In respect of the aforementioned rule the reconciliation of each of the invoice auto-populated in GSTR-2A report of the buyer with the invoice wise credit claimed in GSTR-3B is necessary to be carried out. In case if any supplier has not shown the invoice in his GSTR-1, then necessary communication can be sent to him with a request to file the return by disclosing the missed out invoice. And if the detailed of supply was furnished inadvertently in B2C table of the GSTR-1 return by him then those invoices will not auto-populate and in that case buyer will have to inform him and the supplier will have to correct it in his GSTR-1 to be filed for the month of September 2019 on or before 11th October, 2019. Thus, the month of September 2019 is very crucial month for the taxpayer to take appropriate action on the input tax credit aspect. 

The same activity will also be carried out for the customers. It becomes a moral responsibility  of the supplier to intimate all his customers to carry out their respective GSTR-2A reconciliation. In case the customers find any discrepancies they will inform their supplier and supplier should be able to take action on them in the GSTR-1 to be filed for the month of September 2019 on or before 11th October, 2019. 

It is needless to mention that the contact list with phone number, mobile number, email id of the suppliers and customers need to have in record. The communication in respect to GST compliance can be had without any hassle. In case such list is not handy then the same should be maintained and keep updated regularly. Additionally, it is also necessary to have in record the legal name of the supplier. Generally, the trade name is maintained in record but in GSTR-2A report legal name comes. In case trade name and legal name is different then it becomes difficult to identify the invoice in the dump and reconcile it. The identification can however be made based on GSTIN but obviously the person carrying out the reconciliation might also see the name of the supplier. Hence, it becomes essentials to keep such information in record.

The due date of GSTR-9/9A/9C for the financial year 2017-18 is extended till 30th November, 2019. In such case it happened that along with the preparation of annual return and reconciliation of FY 2017-18, the preparation for FY 2018-19 to the extent of GSTR-2A is required to be carried out. In order to become free from FY 2017-18 compliance, a taxpayer may prefer to complete the work of FY 2017-18 return filing first and file it and then start with FY 2018-19 compliance work. However, the sequence need to be changed, in my view. The reason is filing of annual return for the FY 2017-18 is 30th November, 2019 and the last date to carry out change in invoice/debit note pertaining to FY 2018-19 in GSTR-1/ GSTR-3B for the month of September 2019 is 11th October 2019/20th October 2019.

The reconciliation of GSTR-2A of FY 2018-19 should be carried out on priority preferably from 1st of September 2019. Lot of experience must have gained by the taxpayer from the working of FY 2017-18 which can be implemented in the second year working. Lot of communications would have happened with the supplier and customer and hence for the reconciliation of second year data should be a litte challenge. The consequence /financial impact which has happened to be paid in DRC-03 by the taxpayer in filing annual return for FY 2017-18 can be highlighted to the respective suppliers.  A need for collaborative approach is felt by both taxpayer and the supplier. 

A taxpayer can give a thought to carry out reconciliation of GSTR-2A report for FY 2019-20 on an ongoing basis. As a self start move he can carry out monthly reconciliation which will help them a lot during the filing of annual return. Instead of waiting for the Government to make it mandatory, we should take up the task proactively and carry out monthly reconciliation as a proactive measure.

Discussions to this article

[KASTURI SETHI]

Dear Sh.Kalyani Ji,

Your article is very very useful. I shall term it as wake-up call.

[Ganeshan Kalyani]

Thank you Sir.

[Prasanna Kumar]

Elaborative and very important at this juncture.